Question

Currently, a monopolist’s profit-maximizing output is 200 units per week and it sells its output at a price of $70 per unit. The firm’s total costs are $10,000 per week. The firm is maximizing its profit, and it earns $35 in extra revenue from the sale of the last unit produced each week.

Instructions: Enter your answers as whole numbers.

a. What are the firm's weekly economic profits?
$

b. What is the firm's marginal cost?
$

c. What is the firm's average total cost?

Answer 1

The correct answer for option (a) is $4,000, for option (b) is $35 and for option (c) is $50.

Step-by-step explanation:

According to the scenario, the computation of the given data are as follows:

(a). We can calculate the firm's weekly economic profit by using following formula:

Firm's Profit = total revenue - total cost

Where, Total revenue = $70 × 200 = $14,000

So, Firm's profit = $14,000 - $10,000 = $4,000

(b). we can calculate the firm's marginal cost by using following formula:

Firm's marginal cost = Marginal revenue

As, the firm is maximizing it's profit by $35 then,

Firm's marginal cost = $35

(c). We can calculate the firm's average total cost by using following formula:

Average total cost = Total cost ÷ Number of units

So, Average total cost = $10,000 ÷ 200 units

= $50